The 1.4 billion pound pet-stained global menace

William McDonough and Michael Braungart,

Tuesday, 6 Aug 2013 | 7:00 AM ETCNBC.com

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Sam Hodgson | Bloomberg | Getty Images

Workers create mulch at the Miramar Landfill in San Diego.

Product designers are trained to be a step ahead. For them, what's next is second nature. But when my longtime collaborator chemist Michael Braungart and I ask "What's next?" we're thinking not only about improving the quality and performance of a particular product, but also about recovering the value of products after we're done using them.

What do designers think about when they make the products that fill our lives? We believe that they should be thinking differently now and we have worked with innovative companies to take account of what's next—not the next product, but what is next for that product. What are the use periods it will pass through?

Some of our work has involved what we call "products of service," paired with a leasing concept. Obviously, leasing works great with many goods—cars, houses, land.

More than 25 years ago, we suggested expanding the idea to lease other goods as products of service, items such as large appliances, lighting or carpeting. The manufacturer effectively retains ownership; a customer pays for the use of the product rather than the product itself, which can later be reused in the industry as a technical nutrient—food for new carpets, for example.

When a customer finishes with the product, the manufacturer/vendor retrieves its technical nutrition; and the customer gets a new one, most likely from that very same manufacturer. The advantages are threefold: no "waste" of valuable technical nutrients for industry; the actual retrieval of materials by that industry; and a long and profitable relationship between a customer and a manufacturer.

The plan has worked extremely well for a window manufacturer that essentially leases its windows as products of service. When the company has a better window available, the customer can trade up, and the company reuses the old window materials.

Solar services work well with this model too, in a relationship of constant improvement between company and customer.

Carpeting, it turns out, can benefit from a different approach to products of service. In the first attempts at implementing the idea, some carpet companies leased the carpet and retained ownership.

But this arrangement left them technically liable for the carpet—if someone tripped on its edge and fell, the carpet company could be sued. It then had to pay insurance on the carpeting, which it had not had to do before.

An additional worry about maintenance arose; for example, some carpet-cleaning products degrade the fabric's quality or contain volatile compounds, which would make the returned materials less useful. These issues made the product of service and leasing concepts complicated as transactions for the manufacturer and its customers.

In Poland, for example, ownership is almost a religion, so the "product of service" is purchased outright, along with a deposit that is refundable when the product is returned "unharmed" to the manufacturer at the end of the use period.

We have also developed a model where the manufacturer may choose to repurchase the product and its materials at an effective price in the future. The result is the same: The manufacturer gets back the useful technical nutrients, the product doesn't end up in a landfill and the relationship between customer and manufacturer is maintained.

Our point is when preexisting systems and local needs are taken into account and sensitively interpreted, the product of service model becomes optimized. We might begin to characterize some products, such as chairs, for example, as products of disassembly whose component parts feed intelligent material pools.

Inside the Aurora Casket Company

At Aurora's Indiana headquarters, 200 sets of hands touch every one of the 160,000 caskets that go through the assembly line each year. CNBC's Tyler Mathisen explores a company that thinks inside the box.

Carpets serve as an instructive example, once again. The United States produces approximately 1.4 billion pounds of carpet "waste" every year. The carpet industry remains the last large-scale textile industry left in the nation. Why is that?

Carpeting is heavy yet has low value per pound, so importing it overseas can be prohibitively expensive. With automated factories, its manufacture does not rely on intensive human labor.

What if, in America, 1.4 billion pounds of supposedly obsolete carpet materials could be continuously reused by the carpet industry? What if this liability could be recharacterized and processed as technical nutrients instead? When the concept we refer to as "contingent assets" is implemented, the production of liability converts to the production of assets.

Assets treated as currency—here today, gone tomorrow—become resources. And manufacturers, including a major carpet manufacturer that we advise (Berkshire Hathaway's Shaw Industries), are beginning to do it.

Here is how it works: The manufacturer sells carpeting to the customer, delivers it and installs it. The manufacturer has a deal that, for, say, 20 cents a square yard, it has the option to buy the carpeting and all of its assets back when a customer is finished with it. The benefits are twofold.

First, the value of those assets is essentially set at the time of the sale; if the carpeting is made from petrochemicals and if 10 years after the carpeting is purchased petrochemicals have changed price upward (quite possible), then it is a valuable option for the manufacturer to buy back these technical nutrients and re-source them, rather than pay for new sources of petrochemicals.

Second, the customer and the supplier maintain a relationship (the most valuable part of the transaction). The customer contacts the manufacturer when he is ready to get rid of the old carpeting. The manufacturer sends a truck to pick it up, and it is marvelously convenient and cost-effective for the customer to buy a new carpet from the same manufacturer because it can be delivered at the same time that the manufacturer picks up its technical nutrient assets.

In fact, a major carpet manufacturer we have worked with reports that 57 percent of its total sales come from Cradle to Cradle–certified products—and that includes 91 percent of its commercial carpets and 54 percent of its residential, along with rugs, sports turf and hardwood, laminate, and ceramic tile floors. This company has just signed a contract to have the option of buying back its carpet from a hospital system for 20 cents a square yard. Depending on cost-effectiveness, it can buy it back or not. The long-term relationship with the customer remains the truly delightful prospect.

Similar tactics for upcycling products of service can apply to a range of goods that use technical materials (capital that is, unfortunately, being treated today typically as currency or downcycled to lower grades). We can now design computers and television sets in which all the parts are defined plastics and metals, glued together with a new reversible glue, so that when the product is heated in a disassembly procedure, the glue shrinks and the parts fall apart, greatly simplifying recovery of all the elements.

McDonough is co-author with Braungart of "Cradle to Cradle: Remaking the Way We Make Things" and "The Upcycle: Beyond Sustainability—Designing for Abundance" (North Point Press, 2013). Their new book, from which the above blog post is excerpted, focuses on making material value recovery a viable business strategy and an emerging force in the marketplace.